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TECH TALK: 2003 Expectations: Outsourcing to India and China

The importance of India and China in the technology value chain continues to grow. The world is now looking at markets like India and China for outsourced services. China has become the manufacturing hub, while India is becoming the first choice for outsourced IT and back-office services. As the two economies prosper, they will start becoming big consumers also, creating two huge markets of a billion-plus people in the years to come. More immediately, 2003 will see the outsourcing trend continue. Even as some Indian software companies try and move up the value chain to consulting, others are moving downward to offer business process outsourcing.

Business Week wrote recently on Chinas emerging technological prowess:

It seemed that hardly a week went by in 2002 without another multinational announcing that it was setting up a big research and development operation in China. From General Electric to Philips to Matsushita, the biggest names in American, European, and Asian industry were increasing their commitment to China.

For Beijing’s leaders, this investment is a key part of its strategy to move beyond labor-intensive manufacturing. For proud Chinese, it’s part of a drive to help their country regain its status as a world technology leader. For Americans in Silicon Valley, Indians in Bangalore, and Taiwanese in Hsinchu, it’s another indication that China is well on its way to becoming a far more powerful competitor.

Even as the manufacturing outsourcing to China continues, India has emerged as the preferred destination for services and software. A look at the spectacular new construction happening in places like Gurgaon near Delhi and Whitefield in Bangalore is a reflection of Indias arrival on the world scene – finally.

But 2003 could be the year that companies start to also look beyond India so as not to put all their eggs in one basket. Writes CIO: India has long been the leader in offshore IT outsourcing, with a $4 billion IT services export industry, a decade of lead time over most other countries and upward of 80 percent of the offshore market. The rising demand for those services and increasing risk of terrorist attacks are prompting CIOs who source work abroad to look beyond the usual suspects. In 2003, CIOs looking to outsource can expect to get solicitations from places like Bangladesh or Bulgaria. In reality, most countries are far behind India, which boasts 900 software companies employing 415,000 professionals and more software quality initiatives than even the United States. But there are three up-and-comers that are worth a look. The three countries identified are China, Russia and Philippines.